From Detroit to Tier 1: A field guide to the auto sector in Q2

While GM’s revenue figures were slightly lower, the company’s profitability saw a sharp decline, with adjusted earnings before interest and taxes (EBIT) falling to $2.4 billion from $4.4 billion alongside compressed margins.

Tariffs, unsurprisingly, emerged as a major costs factor with a net impact of about $1.1 billion and an expected full-year gross tariff impact of $4 billion-$5 billion.

GM is attempting to mitigate roughly 30% of this burden through manufacturing adjustments, cost cuts, and selective pricing actions. In practice, that means leveraging its scale and negotiation power. For example, altering supply routes or content to qualify for trade agreements and working with suppliers to reduce costs.

GM announced a $4 billion investment in its U.S. assembly plants to add 300,000 units of U.S. capacity, which is expected to come online in 18 months.   Specific initiatives include onshoring production of some make and models in GM’s portfolio to U.S. facilities from their Mexican facilities, like the Chevrolet Equinox, to increase U.S. capacity utilization.

Ford Motor Group

Ford posted a similar 6% drop in quarterly wholesale vehicle sales in the company’s Ford Blue segment, which includes internal combustion and hybrid vehicles, to 696,000 units, down from 741,000 units in the prior year period. Meanwhile, the company’s Ford Pro segment, which includes Ford’s offerings like the F-150 Super Duty and work-ready vehicles, climbed 15% higher year-over-year to 429,000 units.

Ford likewise experienced a hit from tariffs of around $800 million in Q2, with Chief Financial Officer Jim Farley noting “our net tariff [impact] was estimated at $2 billion” for 2025. The liability was significant enough that Ford trimmed its earnings guidance by roughly $1 billion.

Farley added: “As the leading auto producer in the U.S. and the leading exporter, we’re very clear with the administration. We want to simplify the tariffs so that we can make up for that gap.”

In fact, U.S. manufacturers are competing with fully-assembled vehicle imports that face a reduced 15% tariff, down from the 25% rate through much of the second quarter, under recent re-negotiations with countries like Japan, South Korea, and the European Union (where auto manufacturers like Toyota, Honda, Nissan, Subaru, Mazda, Mitsubishi, Hyundai, Kia, Volkswagen, BMW, Mercedes-Benz, and Fiat are headquartered) in addition to the Jaguar and Land Rover vehicles already subject to a reduced 10% rate from the UK as well as nearly half of the cars that one of the Big Three – Stellantis – produces in Europe on average every year.

Stellantis

Stellantis, too, flagged a sizable tariff impact, estimating its full-year net-tariff cost at about $1.5 billion. The company sold 322,000 units in North America in Q2, a 25% drop from the previous year period.

Chief Financial Officer Doug Ostermann said shipments were impacted “in the first half due to some downtime that we took in the initial period of the tariff announcements, particularly in our products that are produced in Europe, in Canada, in Mexico until we had some clarity on the policy itself.” He added: “The second impact was really higher industrial costs, including the impact of higher fixed asset absorption due to lower volumes, of course, and higher warranty costs.”

The company’s tariff hit was cited at €330 million ($380 million) in the first half of the year, and expects a greater impact in the second half of the year.

Stellantis mentioned the reintroduction of the V8 engine into Ram pickup trucks. The growth strategy would include lifting production numbers to regain market share and offer more lower-cost models of their Ram pick-up truck, suggesting the make/model is a significant piece of the company’s North American strategy.

OEM thoughts about dealer lots

All three automakers’ commentary on inventory levels painted a clear picture: This was a quarter marked by deliberate restraint. GM emphasized U.S. dealer inventory fell nearly 12% year-over-year to 526,000 units, despite a broad industry backdrop of rising supply. GM both alluded to the accounting drag of unsold inventory amid falling resale values, reinforcing the financial upside of keeping production tightly aligned with retail demand.

Ford painted a similar picture, noting a $35 million inventory-related headwind, though that’s relatively modest given the size of the dollar figures of their increase/decrease of inventory in any given quarter.

Stellantis, meanwhile, stressed that inventory globally remained “roughly in line,” with OEM-held stocks up and dealer inventories down, signaling a shift of the burden to automakers’ stockpiles.

The Big Three’s commentary on inventory levels underscores a broader theme: Overproduction carries more risk than underproduction in today’s environment. A pullback in build schedules would likely hit Tier 1 sub-assembly suppliers first, particularly those making structural systems. Among them, extruders that supply crash management components have remained relatively insulated so far, shielded by their integration into high-value safety systems. A prolonged production slowdown could start to ripple into this segment.

Flat-rolled products, by contrast, have already felt the impact. Producers of aluminum sheet to Tier 1 suppliers, especially for non-safety-critical body panels, have been more exposed to early production cuts and substitution, reflecting their lower priority in a constrained build environment.

Lightweight build rates

A few of the largest North American auto parts manufacturers reported earnings ahead of some of their peers due later this month, offering an early look at how midstream suppliers are coping.

The Q2 results from Nemak, Magna International, and BorgWarner add texture to the Big Three’s inventory commentary, particularly because their geographic footprints and customer exposure mirror those of the automakers.

Nemak and Magna are tightly integrated into the same North American supply chains as Ford and GM, while BorgWarner maintains a more balanced presence between the U.S. and Europe, much like Stellantis.

Nemak, which specializes in aluminum intensive castings and structural components for lightweight vehicles, reported a 4% year-over-year volume declined, with Chief Executive Officer Armando Tamez citing OEM inventory corrections as a key factor, coupled with trade uncertainty.

The company’s share of North American production slipped to roughly two-thirds of the 3.9 million vehicles produced in Q2’25, down from 68% of the 4.1 million units in 2024, based on company and analyst estimates.

Magna estimate that Q2 vehicle production in North America totaled a little above 3.8 million units, down from 4.1 million a year ago. Within its portfolio, the Body Exteriors & Structures segment, which leans more heavily on flat-rolled aluminum, saw a 5% year-over-year revenue decline, steeper than the 1%-2% declines in Magna’s Power & Vision, Seating Systems, and Complete Vehicles segments. Despite this, EBIT margin in the segment improved, suggesting cost containment or pricing helped offset volume pressure. Taken together, Magna’s performance underpins how sheet-heavy aluminum applications have already absorbed the brunt of early production slowdowns, as detailed in a recent AMU analysis.

BorgWarner, with greater exposure to powertrain components, offered a more tempered view. The company expects 14.5 million-15.2 million light vehicles to be produced in North America by year end, on either side of Magna’s 14.7 million estimate and well below Nemak’s 16.1 million. It projects a 1.5%-6.0% year-over-year decline in North American light vehicle output from last year and around 20% lower commercial vehicle production for the full year.

BorgWarner’s niche Battery & Charging Systems segment posted a sharp 20% year-over-year drop. While its Turbos & Thermal Technologies is also a specialized product segment, it ranks among BorgWarner’s top revenue contributors. The division logged a 4.2% decline in sales, compared to a milder 2.5% dip in Drivetrain & Morse Systems and a sharp 23.5% increase in PowerDrive Systems.